|
|
Article: Quantity Discounts/Economic Order Quantity: new Quantity Discount Analysis buyers save on total cost and receive more goods. (Total Ownership Cost).
- Article from:
- Program Manager
- Article date:
- September 1, 2002
- Author:
CopyrightCOPYRIGHT 2002 Defense Acquisition University Press. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
We don't always buy the lowest total cost quantity when we buy a quantity-discounted item. We often spend more than we should. This article will show how to buy the lowest total cost quantity, save the buyer money and, in some cases, receive more goods.
Contractors offer quantity discounts. When we buy more of an item, we pay a lower unit cost. However, we should be interested in the total purchase cost (quantity x unit cost), With quantity discounts, the lowest total cost quantity can frequently be a larger quantity than typically bought. Let us clarify with an example.
An electronics supplier offered an item at the following range quantities and unit ...